EC Proposes Import Tariffs On...Large Shoes?

by Ulrika Lomas, for LawAndTax-News.com, Brussels

27 February 2006

Following some speculation on the matter, EU Trade Commissioner, Peter Mandelson on Thursday proposed the progressive imposition of import duties on certain categories of shoes manufactured in China and Vietnam.

The EC stated that it has gathered "compelling evidence" to suggest that the Chinese and Vietnamese authorities have provided shoe manufacturers with tax breaks and cheap loans and rents in order to allow them to undercut their European counterparts.

"This state intervention is leading to dumping unacceptable under WTO rules. Significant comparative advantage in China and Vietnam is being topped up with uncompetitive behaviour," the Commission announced in a statement, continuing:

"There is evidence of injury to EU producers. Since 2001, closely tracking the rise in dumped imports, European footwear production has contracted by about 30%, domestic prices have fallen by 30%. Some 40,000 jobs in the sector have been lost. This is not related solely to dumped goods. But state intervention and dumping in China and Vietnam have exacerbated intense competition."

Under the proposals put forward by Mr Mandelson, which must now go before member states, provisional duties of 19.4% will be imposed on shoes from China, and 16.8% on shoes from Vietnam. This duty will be phased in over a period of five months, beginning at about 4%.

However, shoes under the European size of 37.5 will be exempted from the duties in order to avoid imposing an unduly large burden on parents purchasing footwear for their children, as will trainers and other types of sports shoe.

Writing to the Financial Times last week, Denmark's Minister of Economic and Business Affairs, Bendt Bendtsen warned of the likely impact of tariffs for European consumers.

He suggested to the UK business daily that:

"Our studies show that if consumers are to bear the full burden of an anti-dumping duty of, for example, 40 per cent on imports of shoes from China and Vietnam, the retailers' average price for a typical pair of leather shoes will increase from EUR67 to EUR84. For the consumer this amounts to a price increase of 25 per cent for a pair of shoes for daily use."

"It also shows that the total gain for the EU producers is just above EUR100m a year if an anti-dumping duty of 40 per cent is being levied on leather shoes from China and Vietnam. For the consumers and the user industries in the EC the total loss can be estimated to be approximately EUR975m per year."

"In other words, for each EUR1 gained by the EU producers from trade protection, EU consumers and user industries have to pay almost EUR10."

However, Mr Mandelson has argued that the measure is unlikely to lead to significant price increases for European consumers, explaining that:

"A duty would add just over 1.5 euro on average wholesale prices of 8.5 euro for leather shoes that retail between 30-100 euros. There is margin within the supply chain to absorb a small duty on import costs by spreading it across product ranges and the distribution chain."

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